MONDAY, 22 FEBRUARY 2016

Bank of Philippine Islands:

Earnings miss estimates on weaker trading gains,

slower loan growth

4Q15 profits weaken. BPI booked Php4.4Bil in profits in 4Q15, down 16% year-on-year amidst lower
non-interest income. This brought its full-year profit to Php18.23Bil, 1% up from the previous year.
BPIs earnings missed both COL and consensus forecasts, representing 94% and 93% of estimates
respectively. The underperformance resulted from the continued slowdown in the lending segment,
lower trading gains, as well as weaker-than-expected fee-based revenues. The full-year performance
translates to an ROE of 12.3%. (see Exhibit 1)

Lending business slows in 4Q15. BPIs net interest income rose 9.3% to Php10.0Bil in 4Q15,
matching its slowest year-on-year growth rate over the last 10 quarters. Recall that net interest income
grew 10.7% in 3Q15 and 12.1% in 1H15. The slowdown was largely volume based, with loan growth
reaching just 9.1% as of end 2015, its slowest pace since 1Q10. This is also much weaker than or loan
growth forecast of 15% for 2015. Meanwhile, we estimate that net interest margin remained steady at
~2.8%, in line with our estimates. For FY15, BPIs net interest income remains up 11% to Php38.6Bil.
This, however, is weaker than expected (at 98% of full-year forecast) amidst the slowdown in volume
growth in 4Q15.

Non-interest income ends lower in 4Q15. Non-interest income ended lower at Php5.3Bil in 4Q15,
down 15% year-on-year. Non-interest revenues were dragged by trading and FX gains dropping 44%
to ~Php600Mil during the quarter amidst the volatile trading environment. Meanwhile, while no details
were explicitly given, we estimate that fee-based revenues also weakened during the quarter. We
believe that this is likely because of the high base set in 4Q14 as well as the impact of the slower
volume growth in 4Q15. As a result, non-interest income declined 1% year-on-year to Php20.7Bil,
representing just 94.5% of our 2015 forecast.
Reiterate HOLD rating. We currently have a HOLD rating on BPI with an FV estimate of Php89.00/
sh based on 2.0X 2016E P/BV. Although we continue to like BPI given its size and its track record
of superior profitability and asset quality, we believe that its current valuations are not attractive. The
recent slowdown in loan growth also raises concerns on the sustainability of the banks profitably
going forward.

FORECAST SUMMARY
Year to December 31 (Php Mil)
Net Interest Income
% change y/y
Non-Interest Income
% change y/y
Income Before Tax
% change y/y
Net Income
% change y/y
EPS (in Php)
% change y/y
RELATIVE VALUE
P/E(X)
P/BV(X)
ROAE(%)
Dividend Yield (%)
*source: COL est imat es

2012
27,453
6.14
19,931
25.42
19,573
21.25
16,291
27.06
4.58
27.05

2013
30,324
10.46
22,174
11.25
23,147
18.26
18,811
15.47
5.29
15.47

2014
34,808
14.79
20,979
-5.39
23,020
-0.55
18,039
-4.10
4.64
-12.24

2015E
39,541
13.60
21,918
4.48
25,075
8.93
19,478
7.98
4.96
6.86

2016E
45,367
14.73
22,887
4.42
28,193
12.43
21,899
12.43
5.58
12.43

19.73
3.31
17.49
2.54

17.09
3.08
18.66
1.99

19.47
2.46
14.51
1.00

18.22
2.27
12.96
1.99

16.21
2.07
13.36
1.99

SHARE DATA

HOLD

Rating
Ticker
Fair Value (Php)
Current Price
Upside (%)

BPI
89.00
87.70
1.48

SHARE PRICE MOVEMENT

110

100

90

80

70
22-Nov-15

22-Dec-15
BPI

22-Jan-16

22-Feb-16

PSEi

ABSOLUTE PERFORMANCE
BPI
PSEi

1M
2.21
9.16

3M
1.10
-2.26

YTD
4.59
-2.53

MARKET DATA
Market Cap
Outstanding Shares
52 Wk Range
3Mo Ave Daily T/O

344,581.23Mil
3,929.09Mil
80 - 107
176.78Mil

Charles William Ang, CFA

charles.ang@colfinancial.com

PHILIPPINE EQUITY RESEARCH

Exhibit 1: Results Summary

In PhpMil

4Q14

4Q15 % Change FY14

Net interest income

Non-interest income
Operating expenses
Net income

9,134
6,215
8,507
5,237

9,982
5,274
8,978
4,390

9.3
-15.2
5.5
-16.2

34,808
20,979
29,960
18,039

FY15 % Change
38,640
20,720
31,870
18,230

11.0
-1.2
6.4
1.1

% FY15E
COL Consensus
97.7
NA
94.5
NA
97.0
NA
93.6
92.8

source: BPI, COL estimates

MONDAY, 22 FEBRUARY 2016

BPI

EARNINGS ANALYSIS

page 2

PHILIPPINE EQUITY RESEARCH

Investment Rating Definitions

BUY

HOLD

SELL

Stocks that have a BUY rating have attractive

fundamentals and valuations, based on
our analysis. We expect the share price
to outperform the market in the next six to
twelve months.

Stocks that have a HOLD rating have either

1.) attractive fundamentals but expensive
valuations; 2.) attractive valuations but
near term earnings outlook might be poor
or vulnerable to numerous risks. Given the
said factors, the share price of the stock may
perform merely inline or underperform the
market in the next six to twelve months.

We dislike both the valuations and

fundamentals of stocks with a SELL rating.
We expect the share price to underperform in
the next six to twelve months.

Important Disclaimers
Securities recommended, offered or sold by COL Financial Group, Inc.are subject to investment risks, including the possible loss of the principal amount
invested. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and it may
be incomplete or condensed. All opinions and estimates constitute the judgment of COLs Equity Research Department as of the date of the report and are
subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a
security. COL Financial ans/or its employees not involved in the preparation of this report may have investments in securities or derivatives of securities of
securities of the companies mentioned in this report, and may trade them in ways different from those discussed in this report.

2401-B East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City, 1605 Philippines
Tel: +632 636-5411

MONDAY, 22 FEBRUARY 2016

BPI

Fax: +632 635-4632

EARNINGS ANALYSIS

Website: http://www.colfinancial.com

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